Finder’s Graham Cooke said Australians were still very focused on supermarket prices, even though other products were rising in price. (Source: LinkedIn/Getty)
Australia is currently experiencing a cost of living crisis. Finder’s Cost of Living Pressure Gauge, which tracks financial pressure on households, has remained in the “extreme” range for more than two years.
The main driver of this stress is high cash rates due to inflation. While rising prices for necessities like food, energy and housing are making everyday life more expensive, it is not always the areas with the greatest price increases that are causing the most financial stress. New data reveals that no.
The graph below shows the index of price change across five categories in Australia, using January 2022 prices as 100.
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The grocery index is currently at 119, indicating a 19% increase in grocery prices over this period. However, this number doesn’t tell the whole story.
Bread, cereals and dairy products have all increased more than average (23%), while meat and seafood prices have increased less (12%), mainly due to recent price deflation.
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The graph shows how various products have increased due to inflation over the past few years. (Source: Finder/ABS)
Electricity prices, which soared during the energy crisis, have now stabilized, with an overall rate of increase of 0%. Meanwhile, insurance premiums rose 20%, rent and mortgage prices rose 27%, and gas prices rose 42%.
But data from Finder’s Consumer Sentiment Tracker (CST) shows that the emotional and financial stress associated with these categories often far outweighs the actual price increases.
As part of the survey, Australians will be asked which bills are causing financial stress for their families. Responses were converted into a similar index, with 100 representing the number of households that cited each category as a source of financial stress in January 2021.
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When graphed against inflation, the results are surprising.
Disparities in economic stress
The most significant change in bill stress is the rise and fall in gas prices as the primary cause.
The number of households citing gas costs as a financial burden has fallen significantly compared to its peak in 2022, but is still 83% higher than in 2021, even though gas prices have increased by 42% over the same period. .
But the statistic that stands out is the link between food prices and stress. While the cost of groceries has increased by 19%, stress around groceries has skyrocketed by 105%.
Meanwhile, health insurance costs increased by 20%, while insurance-related bill stress remained flat. So what is causing this contradiction?
Emotional connection to the grocery store
One possible explanation is the emotional connection Australians have with their grocery stores.
Groceries are a frequently visible expense. Most people tend to visit their local stores weekly and buy familiar brands, so even small price increases can feel significant. Food is also a very personal necessity, and rising prices can cause anxiety about being able to afford essentials.
This heightened emotional response may explain why stress around grocery bills has skyrocketed, even though actual price increases have been more modest.
In contrast, health insurance has not increased as a source of stress, even though the overall cost of health, auto, and home insurance has increased by 20%.
This is a significant expense, but people don’t think about insurance on a weekly basis or interact with it every day. As a result, these costs are not as prominent in people’s minds, even though they are rising more than groceries.
While groceries may not have seen the biggest increase among other items, they have become one of the biggest stressors. (Source: Finder)
ACCC investigation into supermarkets
A recent investigation into supermarket pricing practices by the Australian Competition and Consumer Commission (ACCC) has added to the stress on groceries.
The ACCC is investigating whether supermarkets use their market power to temporarily jack up prices and then apply “special offers”.
This price baiting is not new in the retail industry, but it remains to be seen whether these specific allegations will hold up in court.
One positive outcome of this scrutiny could be a reduction in marketing campaigns such as “down down” and “price lock.”
These campaigns offer no real benefit to consumers and also artificially lock retailers into fixed prices, leaving them unable to adjust when suppliers request price increases.
perception and reality
It is clear that rising prices are only part of the problem.
Inflation data shows a significant increase in grocery costs, but the emotional attachment Australians have to their weekly purchases is adding to their financial stress.
Our data shows that Australians are increasingly turning to Aldi as a cheaper option than Woolies or Coles, or are shopping for lower prices at one retailer and more than one to take advantage of a wider price range at the other. There is a trend of expanding stores into retail stores.
This highlights the importance of budgeting and shopping around for the best deals, not just on groceries, but across all financial products.
Ultimately, this approach is your best defense against rising costs of living.
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